WEBVTT - Bloomberg's Clough: GE Shedding 'Too Big To Fail' Label (Audio)

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<v Speaker 1>with Bill the Moaning Bill. Good afternoon, Katherine Sharp. Gains

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<v Speaker 1>again today for US stocks, with the Dow currently hired

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<v Speaker 1>by two hundred and ninety one points, SPS gained thirty seven,

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<v Speaker 1>point four nine events. All ten sp sectors are higher,

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<v Speaker 1>led by gains and energy financials and healthcare down, Transports

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<v Speaker 1>rise a hundred and eighty four points, NASA Biotech climb

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<v Speaker 1>two and a half percent, and the vix is lower

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<v Speaker 1>by ten percent down. Leaders included American Express, Nike, and

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<v Speaker 1>JP Morgan. Nike jumps three percent after its results, while

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<v Speaker 1>mont Santo gain two point four percent after its earnings.

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<v Speaker 1>Live from the first breaking news desk on bow Maloney, Katherine,

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<v Speaker 1>thank you Bill, and to hear live breaking news over

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<v Speaker 1>terminal less. Texas Intermediate crude oil is up a dollar

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<v Speaker 1>sixty four barrel three point four percent. Trading at sparckled

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<v Speaker 1>up seven dollars ten cents. The ounce at ten year

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<v Speaker 1>treasury down eight thirty seconds with the yield of one

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<v Speaker 1>point four nine percent. And that's a Bloomberg business flash.

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<v Speaker 1>You're listening to taking stock with pim Box and katholeen

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<v Speaker 1>As on Bloomberg Radio. General Electric GE isn't too big

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<v Speaker 1>to fail anymore. All it took was the most sweeping

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<v Speaker 1>transformation in the companies one hundred twenty four year history.

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<v Speaker 1>The f s o C, the Financial Stability Oversight Council,

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<v Speaker 1>released GE from its designation as a city, a systemically

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<v Speaker 1>important financial institution, it said Wednesday, no longer poses a

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<v Speaker 1>threat to US financial stability. Seems superior relief not only

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<v Speaker 1>to financial regulators but also to investors. Joining us now

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<v Speaker 1>to discuss this story why it is so important in

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<v Speaker 1>where GE is now and where It's going is Rick Cluff.

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<v Speaker 1>He's industrial reporter at Bloomberg News. GE, of course is

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<v Speaker 1>one of the companies he varies very very closely, and

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<v Speaker 1>he's joining us here in studio. Rick. Welcome, Thank you.

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<v Speaker 1>So uh GE Capital long gone, right, I mean that

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<v Speaker 1>that God started trimmed down even during the crisis almost

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<v Speaker 1>What has g E been doing to finally reach the

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<v Speaker 1>point where you can say, don't don't worry about us anymore.

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<v Speaker 1>We're not doing too much banking and finance kind of

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<v Speaker 1>stuff anymore, well even doing a whole lot, and G

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<v Speaker 1>Capital isn't technically gone. What they're keeping are a couple

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<v Speaker 1>of businesses that will support their manufacturing businesses. So for instance,

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<v Speaker 1>they're going to continue doing aircraft leasing because they also

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<v Speaker 1>make jet engines. So they're keeping a few things, but

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<v Speaker 1>they've they've sold off the bulk of of G Capital,

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<v Speaker 1>I mean, the whole range of businesses like vehicle fleet

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<v Speaker 1>financing and uh, commercial real estate, you name it. Um,

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<v Speaker 1>But they've been doing this. They've sold almost two hundred

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<v Speaker 1>billion dollars facets in in about fifteen months. So give

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<v Speaker 1>us if you could just roughly like figures of how

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<v Speaker 1>big capital was and what it is now. And of

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<v Speaker 1>course you point out in one of your stories, Hey,

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<v Speaker 1>big victory for Jeff mL you know, the guy who's

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<v Speaker 1>been trying to fill jack walts, you know, uh shoes

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<v Speaker 1>for so long. Uh he was the one who build

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<v Speaker 1>up all this financing, this G capital behemoth. Jeff very

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<v Speaker 1>quickly said, oh no more. But what what what? What?

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<v Speaker 1>What size is it? What is it now? Well? You

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<v Speaker 1>know it. It used to be actually about half of

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<v Speaker 1>of g I mean, um, about half of their earnings,

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<v Speaker 1>about half of their sales came from from finance. And

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<v Speaker 1>they announced this plan a little over a year ago

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<v Speaker 1>and and have said that that they want to shrink

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<v Speaker 1>it down to about ten percent of their their earnings

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<v Speaker 1>and they're they're just about there. So how profitable is

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<v Speaker 1>this line of business because a ten percent it's still

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<v Speaker 1>a substantial part of what g E is doing. Is

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<v Speaker 1>it so much that it brings in revenues and is

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<v Speaker 1>a source of of earnings growth or is it more

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<v Speaker 1>that it keeps the cost down for GE by having

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<v Speaker 1>an arm that does some of this very important financing

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<v Speaker 1>for a couple of it's very important divisions. Well, you know,

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<v Speaker 1>and it's not really about profitability. Um, it's not the

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<v Speaker 1>G Capital wasn't profitable. It was that it was volatile,

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<v Speaker 1>and so it was it was after the financial crisis

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<v Speaker 1>that a lot of in ssters really became vocal wanting

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<v Speaker 1>them to uh to basically decide what they're doing with

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<v Speaker 1>that and to to shrink it. And so they said

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<v Speaker 1>for a number of years that they were going to

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<v Speaker 1>shrink it down, but it was only uh in April

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<v Speaker 1>of two thousand and fifteen that they announced a specific

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<v Speaker 1>plan and said that that they're going to get rid

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<v Speaker 1>of almost all of it. And now by having businesses

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<v Speaker 1>finance businesses that that support their their manufacturing ones, there's

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<v Speaker 1>uh more kind of synergy and and so so I

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<v Speaker 1>think investors know what they're dealing with a little better.

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<v Speaker 1>And in fact, your story also points out that selling

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<v Speaker 1>off the bulk of the GE Capital units has been

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<v Speaker 1>a really important reason why some big activist type investors

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<v Speaker 1>have taken large stakes in g Yeah, yeah, that's true.

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<v Speaker 1>Nelson peltz Um was the big name that came in

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<v Speaker 1>last year, and he said that that that was a

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<v Speaker 1>big reason why I think that that they were taking

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<v Speaker 1>a look at ge earlier in the year, and and uh,

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<v Speaker 1>you know, it was one it was after that that

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<v Speaker 1>plan was announced that that they were actually afraid that

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<v Speaker 1>maybe they had missed their chance to get in. But

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<v Speaker 1>they're they're really they still saw a lot of upside

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<v Speaker 1>and then they still have a pretty substantial steak. But

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<v Speaker 1>but yeah, a lot of investors, um, activists and otherwise

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<v Speaker 1>are are are looking at GE now because of the

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<v Speaker 1>changes that they've made. So gees share price uh up

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<v Speaker 1>about sixty five cents today, three dollars and cents. When

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<v Speaker 1>I look at the line chart on my Bloomberg, you

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<v Speaker 1>can see that it's really been stuck in a range

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<v Speaker 1>over the what the past several months. I mean, it

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<v Speaker 1>doesn't it doesn't get much above what thirty two dollars

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<v Speaker 1>to share doesn't know what's is Jeff Emil ever going

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<v Speaker 1>to be able to bust this out of the range

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<v Speaker 1>to the upside and get back even to the levels

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<v Speaker 1>he had years ago before the crisis. Well, you know,

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<v Speaker 1>I think a lot of people will kind of give

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<v Speaker 1>him a break on that, because there there's some recognition

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<v Speaker 1>that maybe the it was a bit the values were

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<v Speaker 1>a bit inflated at the time he took over, and

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<v Speaker 1>and so um, so it was naturally going to come

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<v Speaker 1>down a bit. But but actually I think there there

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<v Speaker 1>really is a recognition recently that of the changes he's

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<v Speaker 1>making and in the share prices starting to reflect that.

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<v Speaker 1>There's some analysts that think it could double by the

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<v Speaker 1>end of the decade. Oh you're that investors large and small,

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<v Speaker 1>that would be nice double by the end of the decade.

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<v Speaker 1>Rick Cloth, thank you so much for joining us. He

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<v Speaker 1>covers ge. He's an industrial reporter for Bloomberg News. I'm

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<v Speaker 1>Kathleen Hayes, my co host Pim Fox is on vacation,

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<v Speaker 1>and I'm taking stock on Bloomberg Radio. Bloomer Taking Stock

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